New Home Sales Plunge, Inventory Soars
New home sales in Orange County tumbled 18.1% in the second quarter from the same period last year as the inventory of unsold units climbed to an 18-month high, a real estate consultant firm said Tuesday.
While the figures show a clear slowing in the local market, economists and industry specialists called the data an indication of the continuing “correction” from the superheated market of 1988 and early 1989.
Buyers closed escrow on 2,037 new single-family and attached homes in the county from April through June, up a slight 2.2% from 1,994 units in the first quarter but a significant drop from the 2,486 units sold a year earlier, according to a report issued Tuesday by the Meyers Group, an Ontario-based firm.
The figures “come as no surprise,” said Adrian Sanchez, regional economist for Security Pacific Bank. “To put it into proper perspective, consider that 1988 and 1989 prices in the coastal areas far outstripped increases in income, with price appreciation of 20% to 25% not uncommon. At some time, the bloom had to come off the rose, so to speak. There is just not the job and income growth in the region to continue to support that kind of housing market.”
But the Meyers report says the inventory of unsold new homes in the county--a principal measure of the health of the new home market--stood at an 18-month high of 3,228 units at the end of June, up from 2,935 at the end of March. The higher the inventory, the slower the market.
Sanchez said builders, however, have finally seen the light and are slashing construction schedules.
Slow as the market has become in Orange County, it is much slower elsewhere. New home sales for the second quarter in Riverside County were off 50.1% from the second quarter of 1989, while sales in San Diego County dropped 47.9% from a year earlier.
Only a spate of buyer incentives, including developer-paid closing costs, reduced interest-rate mortgage programs and decorating and landscaping allowances, as well as a growing incidence of outright price cuts, has kept Orange County’s new home market from crumpling further, said Steve Johnson, Meyers Group vice president. He said the incentives and price concessions are especially prevalent in the overbuilt South Orange County market.
Buyer incentives have combined with a continued strong performance of the lower-priced attached housing market, however, to keep prices from falling as far as sales.
The median price of a new detached home sold in Orange County in the second quarter this year was $356,000, down 3.5% from the year-earlier $369,000 and up 6.3% from $335,000 in the first quarter--when attached homes made up a bigger part of the sales mix.
The median is the halfway mark, meaning the selling price of 50% of all new homes sold in the county in the second quarter was higher, while 50% sold for less.
In the attached market, which accounted for 46.6% of all second quarter sales--up from 44.1% a year earlier--the median price rose 3% to $173,000 from $167,900.
But the median price for attached homes in the county dropped 2.2% from $176,900 in the first quarter, when they accounted for 55.9% of all sales, the Meyers report shows.
NEW HOME SALES IN ORANGE COUNTY
Sales of new units from April through June climbed slightly from the first quarter but were down 18.1% from a year earlier. Prices also were off from a year ago.
2nd Q 1st Q 2nd Q ’89 ’90 ’90 Sales 2,486 1,994 2,037 Median price Detached $369,000 $335,000 $356,000 Attached $167,900 $176,900 $173,000
Source: Meyers Group
